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Takeaway: Absent corporate activity (see HOT), it appears that lodging stocks will only go up on guidance hikes


  • India economic growth in 2015 could exceed China
  • On pace to grow global system by ~8% in 2015, including 10k Delta rooms. Net of deletions, system size should grow 7%
  • Worldwide basis: MAR has 4.5% room count share
  • 100 largest markets: has 6.4% room count share
  • In largest most valuable markets, share of rooms under construction is ~16%
  • Premium RevPAR yield premium fees  
  • Signed deals with nearly 17,000 rooms in 1Q. Expect these new managed
    franchise rooms worldwide will deliver over $38 million of annual
    fee revenue in their third year of operation.
  • Estimate existing contracts have an average of 17 years remaining. The length of MAR's newest contracts average 20 to 25 years.
  • Across the U.S. financing availability continues to ease, particularly for their limited service products.
  • 1Q EPS beat: 1 cent (owned/leased line largely due to strong results in Tokyo) 2 cents of outperformance came from favorable SG&A largely timing
    related. Results partially offset by roughly $0.03 of impairment recorded on depreciation.
  • Better-than-expected incentive fees
  • In North America systemwide transient RevPAR grew 7.0% with
    room rates up 5%. Successfully reduced the volume of special
    corporate business in favor of the greater volume of higher rated
    retail business.
  • Group RevPAR at full-service hotels in North America rose more
    than 5.0% including 4.0% from higher ADR. Demand from smaller
    groups was particularly strong.
  • Systemwide RevPAR at limited service hotels in North America
    increased more than 8.0%; strength in both transient and small
    group demand  
  • Expect continued strong group and transient for North America
  • Full-service hotel group booking pace for the remainder of 2015
    is up roughly 4.0%. (tough 3Q comp)
  • International systemwide REVPAR well ahead of expectations
  • Caribbean/Latin America:  expect RevPAR will increase at a
    mid-single-digit rate with the tough comparison to last year's World
    Cup in Brazil.
  • In Asia-Pacific region, REVPAR: +6.0% with particular strength in Japan and
    India and easy comps in Thailand. 
  • Systemwide RevPAR in greater China increased modestly reflecting strong results in Shanghai; lower RevPAR in Hong Kong. Believe these Asia-Pacific trends will  continue yielding full-year RevPAR growth at a mid-single-digit rate.
  • Europe well ahead of expectations due to strong attendance at group
    events in Germany and higher leisure business in London and
    • Room nights from U.S. travel to our European hotels increased 9.0%
      in the quarter
    • Despite the strong 1Q, expect mid-single-digit growth rate for the full-year.
    • economies of France and Russia are week and central Europe comparisons get more difficult late in the year.
  • MEA: expect mid-to high single digit constant dollar RevPAR growth. Outsized gains in 3Q.
  • Incentive fees: +25% with better-than-expected results at
    Ritz-Carlton and Marriott resorts in Florida and the Caribbean. In
    addition, roughly $3 million of the higher incentive fees were
    related to the timing of incentive fee recognition at one resort and
    $2 million was related to a very strong performance and North
    America limited service hotel.
  • Worldwide 48% of MAR's managed hotels paid incentive fees in the
    quarter compared to 35% in the year ago quarter. In North America 35% of managed hotels paid incentive fees compared to 21% in
    the year ago quarter.
  • Franchise fees: +25% due to higher royalty payments associated with unit growth
  • REVPAR also helped by higher relicensing fees associated with hotel transactions. With a robust hotel resale market, MAR relicensed over 250 franchised hotels during the quarter. Typically the new agreements reflect higher royalty rates than previously and frequently include a commitment to make property improvements.
  • Owned/lease: $5m from Protea, favorable $3m impact from expired leases
  • G&A: declined due to favorable litigation resolutions partially offset by higher guarantee reserves.
  • FX impact for 2015: expect reduction in pretax income $20-25m
  • Repurchased 5.5 million shares during the quarter for approximately $431 million
  • 2Q incentive fees likely flat YoY. Continue to expect strong incentive fees limited service hotels in the quarter there likely to be offset by the impact of full-service hotel renovations and a shift in timing of fee recognition at one resort which benefited 1Q
  • FY 2015: Expect incentive fees will grow in the midteens rate
  • Owned leased and other revenue net of direct expenses should
    increase slightly year over year reflecting higher credit card  branding fees offset by lower termination fees.

Q & A

  • MAR's acquisitions:  essentially flat in 1st year and accretive in future years. 
  • Won't talk about HOT's strategic review
  • Profound differences in MAR's and HOT's recent deals
  • Courtyard on a roll and drove the incentive fee beat
  • NYC supply growth: ~5% in last 4-5 yrs
  • Blended royalty rate: 5.8%
  • More and more limited service hotels earnings incentive fees
  • Peak on limited service incentive fees: $80m (trough: $5m). Last year, they did $20m. Could see $30-35m in 2015.
  • Group bookings in 1Q 2015 for next 12 mth, rates up 6%. For the following 12 months, rates up 5.5% (room night growth of 3.5%)  
  • Inbound travel to US: +1% YoY, European visitors flattish, more business travel than leisure in Q1
  • Including HK, China REVPAR up 1.5%. Exclude HK, up 4.5%
  • 2015: Reiterate mid-single digit REVPAR growth for China. F&B ahead of that target. Will sign fewer deals in China this year. Remain pretty bullish.
  • Will not see much full-service development in Europe
  • Double-digit index gains for Autograph brand
  • MOXY rate higher than Fairfield -smaller room, lifestyle brand
  • Have been aggressive in calling out contract business from our full-service hotels e.g. airline crews. Contract business can often be at a significant discount to the average rate in the full-service hotel because of the way occupancy is moving. Could see that business gets replaced by rack business and will be pretty powerful in driving performance.  
  • FY Delta fees of $12m
  • DC: Downtown modestly negative in Q1 . Suburban modestly positive.  Q2 may be better by a couple of % points. 2016 group bookings doing well. Some growth in govt business but only 1.5% of group.